The U.S. dollar strengthened on Wednesday as global financial markets were impacted by a surge in U.S. bond yields.
Benchmark U.S. 10-year Treasury yields slightly increased, continuing its trajectory towards a 16-year high of 5.0 percent reached earlier this week. On Wednesday, the 10-year yield stood at 4.9506 percent.
In late trading, the dollar index, which measures the greenback against six major currencies, gained 0.24 percent to reach 106.5245.
According to the Mortgage Bankers Association (MBA), the interest rate for a 30-year fixed-rate U.S. home loan surged to 7.9 percent last week, marking the highest rate since September 2000. Joel Kan, MBA vice president and deputy chief economist, stated that “Mortgage activity continued to stall, with applications dipping to the slowest weekly pace since 1995. These higher mortgage rates are keeping prospective homebuyers out of the market and continue to suppress refinance activity.”
Strategists at Citibank expressed their belief that the purchasing managers index data is “yet another sign that a recession is not imminent.” In their note on Wednesday, they added, “We continue to think the U.S. economy will enter recession next year, but in the meantime, risks are balanced toward further Federal Reserve hikes, rather than cuts.”
Meanwhile, in the eurozone, the German IFO Business Climate Index for October rose to 86.9 from the previous month’s reading of 85.8, surpassing market expectations of 85.9.
By the end of New York trading, the euro slid to 1.0567 U.S. dollars from 1.0589 U.S. dollars in the previous session, and the British pound declined to 1.2115 U.S. dollars from 1.2162 U.S. dollars.
Following the October policy meeting, the Bank of Canada (BoC) announced its decision to maintain the benchmark interest rate at 5 percent. Tiff Macklem, governor of the BoC, explained, “Overall, inflationary risks have increased since July. Inflation is on a higher path than we expected… We held the policy rate steady because we want to allow monetary policy time to cool the economy and relieve price pressure.”
By the end of New York trading, the U.S. dollar climbed to 1.3793 Canadian dollars from 1.3730 Canadian dollars, bought 150.0070 Japanese yen compared to 149.8990 Japanese yen in the previous session, advanced to 0.8967 Swiss francs from 0.8932 Swiss francs, and increased to 11.1441 Swedish krona from 11.1128 Swedish krona.
